CAD
Industry Insights
What Is The Federal Excise Vape Tax and How Will It Affect You?
A new federal vape excise tax has gone into effect in Canada, and it applies to all e-liquids and e-liquid-filled products. As vape products as we know them today did not exist at the time, they were not included in the original Excise Act of 2001, which outlined taxation procedures for alcohol, cannabis, and tobacco. The 2022 vape excise tax regulations seek to address the vape category.
We’ve put together this straightforward guide to help you understand the vape excise tax and what its implementation means for you.
What Is The Vape Excise Tax?
Under the new excise tax, any vape product that contains e-liquid will be subject to a tax of $1 for every 2 mL of liquid up to 10 mL. Any product containing more than 10 mL of e-liquid is then taxed at $1 per additional 10 mL of liquid. You can see how this applies to different types and sizes of vape products in the chart below.
|
Type of Vape |
Size in mL |
Excise Tax Calculation |
|
Bulk e-liquid |
10 mL |
$1 for every 2 mL = $5 |
|
Bulk e-liquid |
30 mL |
$5 for first 10 mL + $1 for second 10 mL + $1 for third 10 mL = $7 |
|
Bulk e-liquid |
60 mL |
$5 for first 10 mL + $1 for additional 10 mL x 5 = $10 |
|
Pre Filled pods |
≤ 2 mL |
$1 minimum per pod |
|
Disposables |
6 mL |
$1 for every 2 mL = $3 |
|
Disposables |
13 mL |
$5 for first 10 mL + $1 for second 10 mL = $6 |
|
Disposables |
7 mL |
$1 for every 2 mL (rounded) = $4 |
Although the vape excise tax applies to all vape products that contain e-liquid (including non-nicotine containing e-liquid), vape devices such as mod systems or the battery components of pod systems, as well as related accessories and replacement parts, are not subject to any additional tax under the new system.
While the federal excise tax on its own isn’t what most would call severe, the looming possibility of provincial taxes on top of this amount, potentially even doubling the tax on each item, has many concerned over the affordability of vape products, especially if prices should begin to exceed the average cost of cigarettes. A pack of pods going from $14.99 to $17.99 feels reasonable, but that same pack jumping again in price to $20.99 could see a regression of the number of people that have been able to move away from cigarettes through vaping.
What It Means for Retailers
The brunt of the responsibility with regard to the excise tax falls on the manufacturers and importers. They need to obtain a vaping product licence from the Government of Canada and register under the excise stamp regime in order to receive the stamps that they are required to affix to the packaging of any vape product that contains e-liquid and is therefore subject to the vape excise tax.
Products that are imported to Canada are subject to the excise tax as well which is collected by the Canada Border Services Agency at the time of importation. Vape importers in Canada need to register with the CRA as Vaping Prescribed Persons and file all appropriate forms on a monthly basis. Products that are manufactured in Canada are also subject to excise tax, which is collected by the Canada Revenue Agency.
By the time a vape product reaches a retail shop in Canada, all of the vape products should already be marked with the appropriate excise stamp to show that the tax has been paid and the product is eligible for legal sale in Canada. This also means that the products you are ordering will be more expensive as manufacturers and importers seek to cover the cost of the tax in the pricing of their products. As a result, you will also need to adjust your in-store prices to reflect the change in cost.
If you as a retailer receive any vape products that contain e-liquid, such as pre-filled pods or disposables, and are not marked with a stamp, do not sell them. Get in contact with your supplier to sort out an exchange for properly stamped items.
What It Means for Customers
Message to consumers of vaping products
As mentioned above, the excise tax is being applied at the manufacturer and importer level so the cost of paying the duty should already be accounted for in the price of the product you are purchasing. However, the prices of those products will almost assuredly be higher in 2023 than in previous years. Check out the chart below to see how much more on average you might be spending per year now that the federal vape excise tax is in effect.
|
Device Type and Size |
Excise Tax Cost per Unit |
Average Use per Unit* |
Average Cost of Excise Tax per Year |
|
Mods w/ 10 mL refill bottles |
$5 |
5 days |
365 / 5 = 73 bottles 73 x $5 each = $365 |
|
Mods w/ 30 mL refill bottles |
$7 |
15 days |
365 / 15 ≈ 25 bottles 25 x $7 each = $175 |
|
Mods w/ 60 mL refill bottles |
$10 |
30 days |
365 / 30 ≈ 12 bottles 12 x $10 each = $120 |
|
Closed pod system w/ 2ml |
$1 |
1 day |
365 / 1 = 365 pods 365 x $1 = $365 |
|
Disposables 6 mL |
$3 |
3 days |
365 / 3 ≈ 122 disposables 122 x $3 = $366 |
|
Disposables 13 mL |
$6 |
7 days |
365 / 7 ≈ 52 disposables 52 x $6 = $312 |
*Average use calculated based on 2 mL of e-liquid consumption per day.
Unless you buy your e-liquids in bulk sizes over 10 mL, you will end up paying close to $350 extra each year on your vaping products as a result of the excise tax. The best alternative to the bargain on bulk e-liquids is a large disposable over 10 mL like the Geek Bar B5000 at 10 mL or the Vice Box at 13 mL, both available for order in a wide range of popular flavours through Valor Distributions.
When you order through Valor, you get the top experience for vape wholesale in Canada. All of our products adhere to the new excise tax guidelines whether they are manufactured in Canada or imported from elsewhere. Rest easy knowing that you have the backing of our expert customer service team, and experience the difference of working with top-tier industry professionals that understand the business from top to bottom. Place your next order with Valor today, there’s no minimum quantity required